Despite rumors that it might happen, the investing world was still taken by surprise when Walt Disney (DIS 0.92%) CEO Bob Chapek was abruptly ousted last week and Bob Iger was reinstated in the top role. After the company's underwhelming fourth-quarter earnings report, with sales and earnings per share coming in below Wall Street's expectations, the board announced the surprise move.
Investors cheered the announcement, and Disney stock jumped on the news. The stock is down 36% this year, even with the jump, well below the S&P 500's 16% decline in 2022, and investors see this as a necessary action to breathe some fresh air into the company -- even though you could say it's more recycled than fresh. With several other important developments set to take place in the coming month, December could be a huge time for Disney stock.
1. The Avatar sequel will be released in theaters
Avatar is the highest-grossing film of all time, with nearly $3 billion in total ticket sales. That includes a recent re-release in theaters to get viewers ready for the next installment of the film based on computer-generated imagery. It was originally released in 2009 through Disney's 20th Century Studios, and fans have had to wait more than a decade to see what happens next.
In the meantime, it has racked up huge expenses. Director James Cameron said that it would need to be at least the fourth-highest-grossing movie ever just to cover expenses. That means the pressure is on Disney, especially as it's choking on the expenses related to Disney+ that weighed down profits in the fourth quarter (ended Oct. 1). So far, the studio has plans for three more films in the Avatar franchise.
Avatar: The Way of Water is slated for release on Dec. 16. Expectations are high, and it they're met, it will inspire confidence in Disney stock. If they're not, the stock could spiral down further.
2. Bob Iger is back and making waves
Iger's stunning return to the helm of Disney last week is already impacting the company in practical ways. He immediately set out to reorganize the company's units, which were restructured only two years ago in the wake of the pandemic and the rise of streaming. Previously, Disney reported four operating segments: media networks; parks, experiences and products; studio entertainment; and direct-to-consumer and international.
Under Chapek's direction, Disney centralized its content creation program for distribution to various channels and consolidated into two reporting segments: media and entertainment distribution and parks and experiences.
According to The Wall Street Journal, Iger sent out a company memo on Monday morning, his first day back on the job, announcing a new restructuring. The new structure gives greater control to the creative teams and "rationalizes costs."
That was just the first day. Investors should expect to see the new company structure rolled out over the next few weeks in addition to other changes that Iger will implement to make his mark -- again -- on Disney.
3. Disney+ is raising prices and launching ads
The third major change taking place in December is that Disney+ is raising the base price of its premium option and launching an ad-supported tier. Like Netflix, Disney is taking this step as streaming competition pressures networks and all are looking for new sources of revenue to allay the mounting expenses.
On Dec. 8, the price of the premium, no-ad Disney+ subscription will go up from $7.99 per month to $10.99 per month, while the ad-supported tier will slide into the $7.99 monthly price point. That's slightly above Netflix's pricing, which is $6.99 for the ad-supported tier and $9.99 for the basic, no-ad plan.
Disney is expecting the debut to go well, since it's already highly experienced with ad plans from its decades in traditional television. There's likely to be some churn from the price increase in the no-ad plan, with it more than being made up for in sign-ups for the ad-supported plan. At least, that's what management is hoping. Investors may not find out how it goes, though, until the next earnings report in February.
Each of these factors alone could have a tremendous impact on Disney stock in the coming month. While investors see Iger's return in a positive light, Disney is in flux right now, and investors may want to watch its stock in December while it's figuring out a new path forward.
